Erudio Student Loans, a consortium made up of Arrow Global and CarVal Investors, paid £160m for the portfolio. The deal will see it take control of the government’s remaining 17 per cent of so-called mortgage style loans, which were taken out between 1990 and 1998.
“The private sector is well placed to maximise returns from the book which has a deteriorating value,” said the minister for universities and science David Willets, who announced the deal.
“The sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans. Borrowers will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans.”
Of the loans bought by Erudio, 46 per cent of borrowers are earning below the repayment threshold, 14 per cent are repaying and 40 per cent are not paying, according to their terms of contract.
This is the second time that Arrow Global has snapped up UK student debt, and overall it is now responsible for £1bn of loans at face value when contracts and migrations mature in 2014.
“This is an important step for Arrow Global towards delivering this year’s financial goals,” said chief executive Tom Drury.
Shares in the firm, which launched on the stock market earlier this year, fell 2.7 per cent to close at 238p yesterday.
WHO HAS BOUGHT THE UK’S STUDENT DEBT?
Arrow Global is a debt purchase company, which currently manages over £8bn worth of debt.
The firm was established in 2005 by Zachary Lewy as a European subsidiary of leading US debt purchaser Arrow Financial Services, which was founded in 1961.
Chief executive Tom Drury joined the business in late 2011 from Shanks Group, a FTSE 250 waste management business where he was group chief executive.
Arrow Global purchases debt from retail banks, credit card and telecommunications companies.
The company floated on the London Stock Exchange on 11 October 2013 at a price of 205p per ordinary share, raising £139m and valuing the firm at more than £390m. Since then shares have touched highs of 245p.
Founder Lewy and CEO Drury were named as winners in Ernst & Young’s Entrepreneur Of The Year awards 2013.
CarVal Investors was founded by Cargill in 1987 and takes its name from the caraval ship sailed by Christopher Columbus in 1492.
John Brice is president and chief investment officer and has been with parent company Cargill since 1996. He joined CarVal in 1998.